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The Wealth Distribution and the Demand for Status

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Eric R. Young (University of Virginia)

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Abstract

Standard economic theories of asset markets assume that assets are valued entirely for the consumption streams they can finance. This paper examines the introduction of the demand for status (as a function of wealth) into a model of uninsurable idiosyncratic risk. We find that spirit of capitalism preferences lead to less inequality in wealth and more in consumption. They also imply very different responses to a move from a progressive to a flat income tax; with spirit of capitalism preferences, wealth inequality goes down when the economy moves to a flat tax regime.

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Paper provided by EconWPA in its series Macroeconomics with number 0410008.

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Date of creation: 25 Oct 2004
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Handle: RePEc:wpa:wuwpma:0410008

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E - Macroeconomics and Monetary Economics

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  1. Francis, Johanna L., 2007. "Wealth and the Capitalist Spirit," MPRA Paper 5985, University Library of Munich, Germany. [Downloadable!]
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